evaluation and choice

529

11Evaluation and Choice

11.1 INTRODUCTION

Even when presented a single proposal, decision-makers have a choice between it and doingnothing. Therefore every decision involves at least two options. Evaluation facilitates deci-sion making by appraising the merits (positive impacts) and demerits (negative impacts) ofalternative options in terms of either a single or multiple decision criteria. Determiningwhich impacts are relevant to a particular decision and specifying the appropriate decisioncriteria are related to the value system within which the choice is to be made. In the case oftransportation decisions in the public sector the operating value system is not that of anysingle individual or subgroup but that of the community as a whole. In Chapters 1 and 7 werecognized the existence of conflicting value systems within society. Consequently trans-portation decision making also entails the resolution of conflicts.

Two types of evaluation studies are commonly undertaken: preimplementationstudies, which facilitate the choice of the best course of action from among several alter-native proposals, and postimplementation studies, which assess the performance of alreadyimplemented actions. Postimplementation studies are important for two reasons: (1) Theyhelp to discover whether or not the implemented alternative performs well and (2) they helpto determine whether or not it continues to perform properly over time. This is especiallyimportant in the case of transportation systems, which are subject to changing conditionsand also to evolving goals and objectives. Continuous monitoring and periodic performanceevaluation can help to identify emerging problems and also to provide guidance to thedesign of possible improvements.

To be selected for implementation, an alternative must be both feasible and superiorto all other alternatives. The prerequisites to the admission of an alternative to the list ofacceptable options include the conditions of technological feasibility, economic efficiency,and cost-effectiveness, and availability of the needed resources. In this chapter we present

the fundamental elements of efficiency and effectiveness evaluation techniques, along witha brief description of their conceptual foundations, major strengths, and weaknesses.

11.2 FEASIBILITY AND IMPACT ENUMERATION

11.2.1 Measures of Feasibility

Technological feasibility refers to the ability of a system to function according to the lawsof nature and not to its desirability: A perpetual motion machine may be highly desirablebut technologically impossible. Engineers and other technologists are qualified to deal withquestions relating to technology. Research and development are ongoing activities thatoccasionally lead to technological breakthroughs. The vast majority of practical applica-tions, however, involve the use of existing technology. Even then innovative and creativeways of combining off-the-shelf technology are common. Consequently the question oftechnological feasibility is an aspect of evaluation that cannot be ignored.

Efficiency is defined as the ratio of the quantity produced (output) to the resourcesrequired for its production (input). Physical or machine efficiency is the ratio of the energydelivered by a machine or a process to the energy supplied to it. Although expressed in the sameunit of measurement, the input and the output energy differ in form, for example, energy in theform of electricity vis-à-vis energy in the form of work done by the system. Machine efficiencyis always less than unity because of the unavoidable energy losses that are incurred in theprocess. This waste can be justified only when the usefulness, or utility, of the output exceedsthat of the input. When both the numerator and the denominator are converted to the samemeasure of economic value, their ratio is referred to as the economic efficiency of the machine,which must be greater than unity if the machine is to be economically feasible. The idea of eco-nomic efficiency has been extended to the evaluation of systems to contrast the economic valueof the advantages (or benefits) that are derived from the system to its disadvantages (or costs).

Effectiveness is defined as the degree to which an action accomplishes its statedobjectives. It differs from efficiency in that it does not need to express explicitly all impactsin the same scale of measurement. For example, the effectiveness of a regional transporta-tion system for elderly and handicapped persons may be expressed as the proportion of eli-gible users that live within the service area of the system or as the total number of personsserved, whereas its operating costs may be expressed in terms of dollars. Cost-effectivenessevaluation is the attempt to determine the efficacy of alternatives by comparing their costto their effectiveness. Of course, if an objective method for collapsing all impacts to thesame dimension were available, efficiency and effectiveness would lead to identical results,but no such method exists. Consequently both evaluative methods are used, sometimes sep-arately and sometimes in combination [11.1, 11.2].

An alternative may be technologically feasible, economically efficient, and cost-effective and yet not be a prudent choice for implementation because of the unavailabilityof the financial and other resources that are needed for its implementation. Problems ofaffordability or resource availability are not uncommon. Consider, for example, the case offinancial resources. Usually there exists a lag between the time when financial resources areexpended and the time when the returns of the investment are realized. Lack of access tofinancial resources during this critical time lag would render the investment infeasible.Another common problem of financial affordability that is especially true in the case of

530 Evaluation and Choice Chap. 11

public projects is related to the fact that the benefits derived by a public investment do notusually return in the form of money to the agency that expends the financial costs for theproject. Unless the agency is in a position to afford these expenditures it would not be ableto produce the benefits for whomever they would otherwise accrue.

11.2.2 Impact Trade-Offs

Determining the feasibility of each alternative is only half of the evaluation process. The otherhalf involves the comparison of all proposals (including the do-nothing alternative) in orderto select the best one among them. Based on the assignment of relative weights to the impactsof each alternative, this step involves impact trade-offs. Consider, for example, a choicebetween two transportation alternatives requiring equal and available financial expenditures.Further, assume that one of the two would provide a higher level of mobility than the otherbut would also discharge higher quantities of atmospheric pollutants. This statement impliesthat three impacts have been identified as relevant to the choice, appropriate measures of per-formance have been established to express them, and the likely levels of these impacts havebeen predicted for each alternative, perhaps using the methods of Chapters 8 through 10.When comparing the two alternatives, a trade-off between mobility on one hand and envi-ronmental quality on the other becomes apparent. In the final analysis the evaluation methodused to aid this decision must incorporate the assignment of relative weights to the impacts.

11.2.3 Generalized Impact Matrices

The foregoing example of evaluation raises a problem that is inherent in situations wherethe decision-makers are faced with multiple decision criteria. On the side of costs, the directcost of operating the system and a negative externality (i.e., the unintended undesirableimpact of air pollution) were identified. Direct benefits (e.g., mobility) and potential posi-tive externalities are typically included in the evaluative calculus. All recognizable impacts,whether intended or concomitant, can be classed into positive impacts (i.e., advantages orbenefits) and negative impacts (i.e., disadvantages or costs) and the results of the impactestimation process that precedes the evaluation phase (see Chapters 8, 9, and 10) may besummarized in an impact matrix, as illustrated in Fig. 11.2.1.

This array lists the estimated impacts associated with each alternative expressed interms of the applicable measures of performance, which differ with regard to their units ofmeasurement. Moreover, some are expressed in terms of quantitative measures (i.e., carbonmonoxide concentration), and others are qualitative.

Table 11.2.1 lists the impacts that were considered in the environmental impact state-ment (EIS) for a proposed Honolulu Area Rapid Transit (HART) System [11.3]. The firstcolumn summarizes the goals and objectives set forth in the regional general plan for theisland of Oahu, where the city of Honolulu is located. The second column presents the spe-cific goals identified by an earlier Oahu transportation study. Following are the objectivesestablished by two previous Preliminary Engineering Evaluation Program studies of transitalternatives (PEEP I and II). The fourth column lists the criteria that were selected tomeasure the performance of alternative systems. Also noted is the potential applicability ofthese criteria to three characteristics of alternative proposals, that is, route location, transitsystem type, and system length. The rapid-transit alternatives are augmented by feeder busservices.

Part 3 Transportation Impacts 531

Table 11.2.2 summarizes the analytical results obtained by applying the sequentialtransportation demand-forecasting process described in Chapter 8. This table includes onlydirect impacts.

Table 11.2.3 is the generalized impact matrix developed in connection with theHART EIS. It includes the direct and indirect impacts of each alternative either in quanti-tative terms or qualitatively.

11.3 ENGINEERING ECONOMIC ANALYSIS

11.3.1 Background

Traditional engineering economic analysis is based on the principle that the quantifiedimpacts of alternatives should and can be converted to their monetary equivalents andtreated just as if they were money. With this conversion, the calculation of economic effi-ciency and the comparison of alternatives on the basis of their costs and benefits can be con-ducted. The basic unit of measurement employed (i.e., money) has certain attributes thatmust be retained in the calculation of benefits and costs. A fundamental characteristic ofmoney is its time value. Simply stated, this says that “a dollar today is not the same as adollar tomorrow.” To illustrate this point, consider the situation where an amount of $100is deposited in a bank at an interest rate of 10%. One year from the day of deposit, $110may be withdrawn from the bank. In this case $100 today is equivalent to $110 dollars ayear from today. The interest or discount rate affects this equivalency.

11.3.2 Project Evaluation

Based on the axiom that the consequences that are relevant to the impending decision canbe equated with money, each alternative may be considered to consist of two cash flows: acash flow of benefits and a cash flow of costs, both shown as money equivalents at the timeswhen they are expected to occur (Fig. 11.3.1). A proposed alternative is considered to beeconomically feasible when the benefits to be derived from it exceed its costs. This com-parison between benefits and costs is legitimate only when the two cash flows are placed


Figure 11.2.1 Generalized impact matrix.

Impact Environmentalcategory

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on the same time basis. Given an appropriate interest rate, the present worth of benefits(PWB) and the present worth of costs (PWC), or their equal series cash-flow equivalents,may be calculated. Chapter 12 develops the appropriate formulas that can be used for thistask, which the reader may wish to review before continuing with the rest of this chapter.

The net present worth (NPW) of an alternative is defined as the present worth of itsbenefits minus the present worth of its costs. Hence a positive NPW implies economic fea-sibility. Another way of contrasting benefits and costs is the use of the benefit-cost (B/C)ratio, in which case the economic feasibility criterion requires a B/C ratio that is greaterthan unity. A third method of assessing the economic feasibility of an alternative is one thatcalculates the internal rate of return (IRR), which is defined as the interest rate that justequates benefits and costs, that is, the rate at which the NPW equals zero and the B/C ratioequals unity. This rate is then compared with a predetermined minimum attractive rate ofreturn (MARR) reflecting managerial policy and profit expectations to assess whether ornot the project is attractive.

11.3.3 Independent and Mutually Exclusive Alternatives

Before discussing the mechanics of economic evaluation of alternatives, it is appropriate toexplain several principles that are explicitly or implicitly encompassed by the final choice.First, the set of alternatives being considered should include the do-nothing, or baseline,alternative. Second, pairs of alternatives can be either independent or mutually exclusive.Two alternatives are independent when the selection of one does not necessarily prohibitthe selection of the other. For example, a state department of transportation may be con-templating the provision of subsidies to the bus systems of two different cities. Assumingthat the necessary resources are available to the department, a decision to subsidize one citydoes not necessarily eliminate a favorable outcome for the other. By contrast, a pair of alter-natives are said to be mutually exclusive if the choice of one renders the other impossible.A metropolitan transit authority engaged in the comparative evaluation of two technologi-cally incompatible transit systems on a single alignment is faced with mutually exclusivealternatives. Third, the do-nothing alternative and each of the do-something alternatives aremutually exclusive. Fourth, the list of options under consideration includes all possible


Figure 11.3.1 Streams of benefits and costs.

B0

B2B1

B3

C0

C1

C2

C3

Bn

Cn

Benefits

Costs

. . .

. . .

combinations of independent alternatives. For example, when two independent projects arebeing considered, the list of available options contains four entries: the do-nothing alterna-tive, each of the two projects alone, and the two in combination. When viewed in thismanner, the four options are actually mutually exclusive, as it is not possible to implementone project alone and both projects together at the same time. The problem of economicevaluation and project selection becomes one of discovering the alternative combination offeasible projects that maximizes the benefits to be derived from the expenditure of avail-able resources.

Example 11.1

A regional planning organization is considering the following proposals: two mutually exclu-sive alignments for a highway in county A (projects A1 and A2), two mutually exclusive align-ments for a highway in county B (projects B1 and B2), and a special transportation system forhandicapped persons in city C. What is the number of available options?

Solution Considering that with regard to the first and second highways, three possibilities exist(i.e., not building, selecting alternative 1, and selecting alternative 2) and that two choices are pos-sible with regard to alternative C, the total number of proper combinations is 3 � 3 � 2 � 18, asillustrated in Fig. 11.3.2. If any one of the projects is infeasible, the total number of options isreduced accordingly. If, for example, alternative A1 were judged to be infeasible, the total numberof options would become 3 � 2 � 2 � 12. Similarly, if project C were found to be infeasible, theremaining options would number 3 � 3 � 1 � 9.


Figure 11.3.2 Alternative combinations of options.

B1 � C

B2 � C

A1 � B

2 � C

A2 �

B2 �

C

C

A1 � B1 A1 � B2A1

B1 B2Donothing

A2 � B1 A2 �B2A2

1 2No

NoNo

1

2

Project B

Pro

ject

A

Projec

t C

No

Yes

11.3.4 Evaluation of Mutually Exclusive Alternatives

Consider two mutually exclusive do-something alternatives with the following discountedbenefits and costs expressed in millions of dollars.

Alternative PWB PWC NPW B/C

A 1.8 1.2 0.6 1.50B 2.9 2.2 0.7 1.32

According to the NPW criterion, alternative B is superior to alternative A, but according tothe B/C criterion, alternative A is better than alternative B. This inconsistency between thetwo methods can be rectified by augmenting the B/C evaluation with an incrementalanalysis. To understand the rationale of incremental analysis, consider the simplified situa-tion where the total $2.2 million is in hand and no other investment option is possible; thatis, the available amount of money could be either expended in one of the two projects orplaced in a safe deposit box, where it would earn no interest. Under these assumptions theoverall investment strategies associated with each of the two alternatives are (1) to invest$1.2 of the $2.2 million in the less costly alternative A, which will return $1.8 million in ben-efits, and place the remaining $1.0 million in the safe deposit box, which will return no addi-tional benefits, and (2) to invest the entire $2.2 million in the more costly alternative, whichwill derive total benefits of $2.9 million. The present worth of the benefits resulting from thefirst strategy would equal $1.8 million plus $1.0 million, or $2.8 million, as compared to the$2.9 million associated with the more costly alternative. Hence investing in the secondoption is the more prudent choice. Another way of stating the above is that the incrementalbenefits ($2.9 � $1.8 � $1.1 million) derived from the costlier alternative outweigh theincremental costs ($2.2 � $1.2 � $1.0 million) it entails, or that the incremental B/C ratiobetween the two options is greater than unity. Thus when both alternatives are feasible inthemselves, the incremental B/C ratio and the NPW criteria lead to identical conclusions.The incremental ratio analysis of feasible options is conducted as follows: The feasible alter-natives are listed according to increasing cost, with the least costly alternative at the top ofthe list. If the incremental ratio between the first two entries is greater than unity, the morecostly alternative is selected; otherwise the less costly alternative is retained. The chosenalternative is then compared with the next list entry and the procedure continues until allalternatives have been considered and all but the best alternative have been eliminated.

Example 11.2

The benefits and costs associated with the following five mutually exclusive alternatives havebeen discounted to their present worth and the alternatives have been listed according toincreasing cost. Apply the B/C ratio method to select the best option.

Alternative PWC PWB B/C

A 100 150 1.50B 150 190 1.27C 200 270 1.35D 300 290 0.97E 320 350 1.09


Solution After forming the B/C ratio, alternative D is found to be infeasible and therefore isdropped from further consideration. The incremental B/C between A and B is (190 � 150)/(150 � 100) � 0.8, and the costlier alternative B is dropped. The incremental ratio between Aand the next feasible alternative in the list (i.e., C) is equal to(270 � 150)/ (200 � 100) � 1.2and C is favored over A. Finally, the comparison between C and E yields an incrementalratio of 0.67. Since this is less than unity, the less costly alternative C is retained as the bestoption.

Discussion Alternative C has been selected even though alternative A has a larger individualB/C ratio. It can easily be shown that the NPW criterion leads to the selection of the same alter-native. The incremental ratio analysis must be preceded by an individual ratio analysis to elim-inate all infeasible alternatives. If the incremental ratio analysis were to be applied directly toa list that happened to contain only infeasible alternatives, it would result in the selection of theleast infeasible without any indication that the selected option is in fact infeasible. Seriousproblems related to this point arise in situations where, for practical reasons, the benefits andcosts of do-something alternatives are calculated relative to the do-nothing alternative. Forexample, travel time or fuel savings are often considered to be benefits associated with pro-posed highways as compared to the do-nothing alternative. In that case the B/C analysis is anincremental analysis from the start. To illustrate this point, consider the following simpleexample: The benefits and costs associated with an existing highway (do-nothing) and a pro-posed highway are:

Alternative PWB PWC

Existing 1.2 1.8Proposed 1.9 2.4

Clearly neither of the two is feasible. However, if the benefits and costs of the proposedhighway were to be reported only in relation to the do-nothing alternative, the proposed projectwould have an appearance of feasibility and an incremental B/C ratio of 1.17. Moreover, theNPW of the relative benefits and costs would also be misleading. To avoid problems of thisnature, ways of measuring benefits and costs in absolute rather than relative terms have beenproposed. One such method is based on the theory of consumer surplus [11.4], but althoughconceptually attractive, these attempts are not without practical difficulties.

11.3.5 Identification and Valuation of Benefits and Costs

The conduct of economic evaluation procedures for the selection of the best alternativerequires the conversion or valuation of quantified impacts to monetary terms. Impact valu-ation presents varying degrees of difficulty. Some impacts, such as construction and main-tenance costs, are already expressed in monetary terms. The rest must be translated intomonetary equivalents. As an illustration, Fig. 11.3.3 presents a family of curves suggestedby a 1977 AASHTO manual [11.5] for the conversion of travel-time savings to dollars.These curves are based on extensive economic explorations into the matter, and unlike ear-lier versions, which assumed a linear relationship between time saved and dollar value irre-spective of trip purpose, the 1977 version provides for a nonlinear relationship and asensitivity to trip purpose. A linear relationship at, say, $1.50 or $2.80 per hour saved wouldbe highly inappropriate if millions of daily trips, each saving a few minutes, were to besimply added together. According to Fig. 11.3.3, such small time savings are insignificant


individually. Other impacts of transportation projects (e.g., effect on rural lifestyles or aes-thetics) are much more difficult to quantify, let alone express in dollar equivalents. How-ever, in order to be included in a B/C economic evaluation, they must be quantified andvaluated.

11.3.6 Limitations of Economic Evaluation

The foregoing commentary brings to light the fact that economic efficiency analysis is notas objective as it may seem at first glance. Its strongest advantage is that it provides a usefulquantitative but partial picture of the subject matter. Its major limitations may be classedinto problems of impact enumeration, valuation, and distribution. The selection of an appro-priate interest rate and the treatment of price inflation and deflation are also problematic.

The question of impact enumeration refers to the fact that not all impacts consideredto be important can be included in the analysis. Even though no evaluation technique canpossibly include all ramifications of major transportation projects, economic efficiencyanalysis further restricts the admissible set.

The problem of impact distribution refers to the fact that the benefits and costs aredistributed unevenly between individuals and groups. For example, some persons may haveto relocate their residences or businesses to permit the construction of a highway that couldresult in travel time and fuel savings for another group, the users of the new highway. Sim-ilarly, it may be argued that subsidizing a public transportation system entails the taking oftax dollars from everyone in order to enhance the mobility of the few that ride the system.In this connection the first piece of federal legislation to require a B/C analysis for publicprojects explicitly stated that public projects are justified:

. . . if the benefits to whomsoever they may accrue are in excess of the estimated costs([11.6], emphasis added).


Figure 11.3.3 Value of time saved by trip purpose.(From AASHTO [11.5].)

6

5

4

3

2

1

00 5 10 15 20

PERSONAL BUSINESS

WORKAVERAGE

SOCIAL/RECREATIONAL

VA

LU

E O

F T

IME

� d

olla

rs p

er tr

avel

er h

our

TIME SAVED � minutes

Of course, counterarguments are possible in both examples just cited, but this is notthe proper place to address them. It is clear, however, that those who perceive that they willbe adversely affected by a proposed project are not obliged to acquiesce on the grounds thatthe calculated overall B/C ratio is greater than unity.

11.4 EFFECTIVENESS ANALYSIS

11.4.1 Background

The preceding discussion has pointed out that even when they can be quantified in terms ofspecific measures of performance the various impacts associated with proposed alternativesare often difficult to express in monetary terms. Effectiveness, which has been defined asthe degree to which the performance of an alternative attains its stated objectives, seeks torectify this problem by explicitly accounting for such impacts and providing a frameworkwithin which these impacts can be clearly defined and traded off via the choice of alterna-tive. The effectiveness approach to evaluation and decision making is founded on the axiomthat more informed, and hence better, decisions would result if the decision-makers werepresented with the maximum amount of available information about the subject. Withinthis framework the basic role of the analyst becomes more concerned with facilitating thedecision-making process by devising well-organized ways to summarize and transmit tothe decision-makers the data required for the decision and less concerned with applying aspecific technique that presumes to determine unambiguously the “best” alternative. At thesame time the role of the decision-makers becomes more demanding as they are given theadded responsibility of ultimately assigning relative values to the merits and demerits of thealternatives being considered. The vast technical literature on specific techniques that maybe used to measure effectiveness (ranging from purely subjective to highly quantitative) aswell as the decision-making processes and the institutional structures for which these tech-niques are best suited spans several disciplines. Only the basic elements of effectivenessanalysis are discussed here.

11.4.2 Cost-Effectiveness

The application of economic efficiency methods to public projects had its origins in thecivilian sector and the provision flood protection. Cost-effectiveness on the other hand wasfirst applied in connection with the evaluation of military systems. In its strictest sense cost-effectiveness was an extension of the principles of economic efficiency, as it was concernedwith maximizing the returns (in terms of effectiveness) of public expenditures described interms of the monetary costs associated with the life cycles of proposed systems. The fol-lowing simple example illustrates the essence of the method.

Suppose that the administration team of a university (i.e., the decision-making body)is faced with the task of selecting a new computer system for the college of engineering.Because the system is to be used primarily for undergraduate instruction, it has been agreedthat the system should maximize the number of users it can accommodate simultaneouslyand that this number must be at least equal to that supported by the existing system. On theother hand, the administration has established a maximum cost constraint as well. Severalcomputer manufacturers responded to a request for bids with the six mutually exclusive


proposals shown in Fig. 11.4.1. In accordance with the agreed-upon rules, alternative Awould be dropped because it fails to meet the minimum effectiveness level and alternative Fwould be eliminated as its costs exceed the maximum available resources. Furthermore,alternatives B and C and the do-nothing alternative would also be eliminated, as they costat least as much but offer no better level of effectiveness than alternative D. The final choicewould rest between alternatives D and E and would involve a trade-off between dollars andthe number of potential users. This choice is an incremental consideration, but unlike theincremental analysis applied to the B/C ratio, the relative worth of the two impacts beingtraded off would be implicit in the final choice. The choice of alternative E would implythat the extra benefits are at least equivalent to the extra costs required. Conversely, theselection of alternative D would carry the implication that the worth of the incrementaleffectiveness associated with alternative E is less than the worth of the incremental dollarcosts it would entail.

The problem of selecting the best computer system would be further complicated ifthe system’s effectiveness were multidimensional, for example, if the availability of engi-neering software (however measured) were also considered to be important. Thus, as thedimensions of effectiveness increases, so does the complexity of determining the relativeworth of the alternatives (i.e., evaluating them). Consequently an individual decision-makersoon becomes overwhelmed with vast amounts of often-conflicting information. The matterbecomes worse as the number of individuals constituting the decision-making groupincreases. Hence a need arises to organize the available information and to establish proce-dures that aid the attainment of consensus.

Several ways by which the relative assessment of alternatives may be accomplishedare as follows:

1. The decision-makers select the best based on their unexpressed subjective judgments.


Figure 11.4.1 Example of cost versuseffectiveness.

E F

D

B C

A

Min

Num

ber

of u

sers

Max

Cost

Donothing

2. Aided by the analyst, decision-makers rank alternative options in an ordinal sense(i.e., A is better than B) and make selection by one of several rank-ordering proce-dures.

3. Aided by the analyst and other sources, the decision-makers assign a score (usuallybased on the relative weights of impacts) to each alternative and select the one withthe highest score.

11.4.3 Rank-Ordering Techniques

A rank-ordering technique with obvious application to the topic is one that Sage [11.7]treats with mathematical formalism and which has been applied in several variations byothers. In simplified form the method works as follows.

The decision-maker, faced with n alternatives, is asked to compare them in pairsaccording to a contextual relationship, such as “alternative i is superior to alternative j.”After the decision-maker has completed the consideration of all pairs, the following rulesare examined to ensure consistency: (1) An alternative cannot be superior to itself. (2) If iis superior to j, then j cannot be superior to i. (3) If i is superior to j and j is superior to k,then i is superior to k. If the decision-maker violates any of these rules, an inconsistency isdetected that should be resolved.

Example 11.3

Considering four options, a decision-maker has completed the following array by placing a 1in cell (i, j) if the answer to the question “option i is superior to option j” was affirmative anda 0 otherwise. Check for any inconsistencies in the decision-maker’s logic, and if none arefound, identify the rank order of the four options.


ji A B C D

A 0 0 1 1B 1 0 0 1C 1 1 0 1D 0 0 0 0

Solution The diagonal elements are all 0, as expected. However, A has been designated to besuperior to C at the same time that C was considered to be superior to A. Moreover, a circu-larity exists between A, B, and C: B was considered to be superior to A, C superior to A, andC superior to B. Therefore a defect in the assessment is revealed. The same conclusion may bereached by drawing the directed graph shown in Fig. 11.4.2, where each arrow is directed fromthe inferior to the superior option.

Example 11.4

Assume that the inconsistency of Example 11.3 was pointed out to the decision-maker and thatafter considerable thought the decision-maker revised the original assessment by rating option Ainferior to option C. Revise the solution of Example 11.3.

Solution The revised directed graph is shown in Fig. 11.4.3. Furthermore, by eliminatingredundant arrows (e.g., from D to C), a clear rank order emerges.

Discussion This method produces a consistent ranking of the options based on the sub-jective judgment of the decision-makers that can provide guidance to the discovery ofinconsistencies that need to be clarified and resolved. When the decision-making body con-sists of many individuals, an overall compromise must be made. One way of accomplishingthis is the method by which the “number 1 college football team” is selected in the UnitedStates: A panel of experts (i.e., football coaches and sports reporters) are asked to rank thetop teams and the team that receives the most first-place votes is ranked as being the best.Alternatively, each first-place, second-place, and so on, vote is weighted and combined to derivean overall score.

Table 11.4.1 illustrates the application of the ranking techniques to eight alternativesconsidered in the 1979 Honolulu study, which is described in subsection 11.2.3. Note that thenumber of firsts, seconds, and thirds have been tabulated as well. Table 11.4.2 is a similar sum-mary of rankings for the baseline alternative, an alternative consisting of a combination of TSMstrategies and a 14-mi-long fixed-guideway rapid-transit alternative. Table 11.4.3 presentssome details relating to the basis on which several of the rankings of Table 11.4.2 were derived.


Figure 11.4.2 Graphic identification ofrank-ordering deficiencies.

C

D

BA

Figure 11.4.3 Clear rank order.(a) (b)

D D

C C

A

A

B

B

547

TABLE 11.4.1 Summary of Rankings for Eight Alternatives

7 14 23 28 23mi mi mi mi mi

Bus. LRT FGa LRT FGa LRT LRT FGa

Objective 1a. Availability & coverage — — — — — — — —

b. Avg. trip time (min.) 2 1 1 — — 2 3 1

c. Service reliability 2 1 1 — — 2 2 1

d. Rider convenience (transfers per trip) 1 2 2 — — 2 1 2

e. Rider comfort 2 1 1 — — — — —

Objective 2a. System patronage 2 1 1 — — 2 2 1

b. System capacity 2 1 1 — — — — —

Objective 3a. Consumption of land (acres) 3 2 1 2 1 2 2 1

b. Displacement of residents (units) 3 2 1 2 1 2 2 1

c. Displacement of businesses (units) 3 2 1 2 1 2 2 1

d. Reduction of community amenities — — — — — — — —

e. Disruption to future development — — — — — — — —

f. Disruption to local circulation — — — — — 2 3 1

g. Disruption from constr. activities — — — — — 1 2 1

h. Savings in energy (million gal/yr.) 1 3 2 2 1 2 3 1

i. Technical risk 3 1 2 1 2 1 1 2

Objective 4a. Support regional development — — — — — — — —

b. Support comm. development — — — — — — — —

Objective 5a. Reduction air pollution (ton/yr.) 3 2 1 2 1 3 2 1

b. Noise level (dBA) 3 2 1 2 1 2 2 1

c. Visual intrusion 3 2 1 2 1 2 2 1

d. Vistas 2 3 1 2 1 1 1 2

e. Historic sites — — — — — — — —

Objective 6a. Reduce accident exposure — — — — — 2 2 1

b. Security — — — — — — — —

Objective 7a. Total annual cost 3 2 1 2 1 1 3 2

b. Cost per trip 3 2 1 2 1 2 3 1

c. Benefit-cost ratio 3 2 1 2 1 2 3 1

No. of firsts 2 6 15 1 11 4 3 15

No. of seconds 6 10 3 11 1 14 10 4

No. of thirds 10 2 0 0 0 1 6 0

aFG � fixed guideway.Source: Urban Mass Transportation Administration [11.3].

548

TABLE 11.4.2 Summary of Rankings: Baseline, TSM, and Fixed Guideway

Approach A

14-mi.Evaluation factors Baseline TSM fixed gwy.

Objective 1a. Availability & coverage 2 1 1

b. Avg. trip time 3 2 1

c. Service reliability 3 2 1

d. Rider convenience 2 2 1

e. Rider comfort 2 2 1

Objective 2a. System patronage 3 2 1

b. System capacity 3 2 1

Objective 3a. Consumption of land 1 2 3

b. Displacement of residents 1 1 2

c. Displacement of businesses 1 2 3

d. Reduction of community amenities 1 1 2

e. Disruption of future development 1 1 2

f. Disruption of local circulation 3 2 1

g. Disruption from constr. activities 1 1 2

h. Savings in energy 3 2 1

i. Technical risk 1 1 2

Objective 4a. Support regional development 2 2 1

b. Support comm. development 2 2 1

Objective 5a. Reduction air pollution 3 2 1

b. Noise level 2 2 1

c. Visual intrusion 1 1 2

d. Vistas 1 1 2

e. Historic sites 1 1 2

Objective 6a. Reduce accident exposure 3 2 1

b. Security 2 2 1

Objective 7a. Total annual cost 1 2 3

b. Total annual cost per trip 1 2 3

c. Benefit-cost ratio — 2 1

No. of firsts 12 9 16

No. of seconds 7 19 8

No. of thirds 8 0 4

Source: Urban Mass Transportation Administration [11.3].

549

TABLE 11.4.3 Comparative Evaluation Matrix: Baseline, TSM, and FixedGuideway

Approach A

14-mi.Evaluation factors Baseline TSM fixed gwy.

Objective 1a. Availability & coveragea (2) (1) (1)

b. Avg. trip time (min) 40.7 40.1 33.7

c. Service reliabilitya (3) (2) (1)

d. Rider conveniencea (2) (2) (1)

e. Rider comfort (2) (2) (1)

Objective 2a. System patronage—1985 (million/yr.) 64.7 83.6 102.4

b. System capacitya (3) (2) (1)

Objective 3a. Consumption of land (acres) — 3 22

b. Displacement of residents (units) — — 162

c. Displacement of businesses (units)a — 2 183

d. Reduction of community amenitiesa (1) (1) (2)

e. Disruption of future developmenta (1) (1) (2)

f. Disruption of local circulationa (3) (2) (1)

g. Disruption from constr. activitiesa (1) (1) (2)

h. Savings in energy (million gal/yr.) — 0.9 4.5

i. Technical riska (1) (1) (2)

Objective 4a. Support regional developmenta (2) (2) (1)

b. Support comm. developmenta (2) (2) (1)

Objective 5a. Reduction air pollution (ton/yr.) — 220 2260

b. Noise level (dBA) 86–88 86–88 77

c. Visual intrusiona (1) (1) (2)

d. Vistasa (1) (1) (2)

e. Historic sitesa (1) (1) (2)

Objective 6a. Reduce accident exposurea (3) (2) (1)

b. Securitya (2) (2) (1)

Objective 7a. Total annual costb—1985 ($ million) 32.9 45.0 66.2

b. Total annual cost per trip ($) 0.508 0.538 0.647

c. Benefit-cost ratioc — 1.12 1.13

aFor comparative measures, alternatives are ranked in the order of how well they met theobjective.

bAll costs based on constant 1975 dollars and an interest rate of 7%.cBased on constant 1975 dollars.Source: Urban Mass Transportation Administration [11.1].

11.4.4 Scoring Techniques

The objective of scoring techniques is the assignment of meaningful grades to the alterna-tives in a manner that reflects the degree to which they differ from each other. Numerousscoring techniques and procedures are reported in the technical literature. The followingdiscussion is an amalgamation of these methods, emphasizing their rationale rather than anin-depth examination of any one in particular.

Figure 11.4.4 is an expanded version of the generalized impact matrix of Fig. 11.4.1as it relates to one of the alternatives being evaluated. The impacts that are considered to berelevant to the evaluation are listed in the first row of Fig. 11.4.4. Related impacts are com-bined into a smaller number of evaluation criteria, which are themselves combined to yieldthe alternative’s overall score. Conceptually the combination of a set of impacts into a cri-terion is identical to the derivation of the overall score from a set of quantified criteria. Fur-thermore, the evaluation of very complex systems may require more than the three levels ofaggregation illustrated. At the other extreme the simplest case involves a scoring schemethat is based on a single criterion, which is identical to a single impact. A slightly more com-plex case entails a single criterion that is composed of several impacts. The composite gradeof any criterion involves the following steps:

1. The impacts that constitute the criterion are identified and quantified, usually on dif-ferent scales of measurement.

2. The quantified impacts are placed on the same scale of measurement.

3. The scaled impacts are assigned relative weights and combined.


Figure 11.4.4 Impacts, criteria, and overall score.

Overall Score

Criterion 1

Impact1, 1

Impact2, 1

Impactk, 2

ImpactM, N

Criterion 2 Criterion N

For instance, the NPW, which incorporates the net effect of many impacts, may serveas one of several evaluation criteria. As explained in Section 11.3, the NPW of an alterna-tive is derived by first predicting the likely impacts of the alternative (step 1), translatingthe disparately quantified impacts to dollar equivalents (step 2), and weighting them equallyas if they were in fact dollars (step 3). The general scoring methods discussed here allowfor (1) the use of a common scale other than a monetary scale and (2) the assignment ofunequal weights to the impacts. This is the essential difference between measures of eco-nomic efficiency on one hand and measures of effectiveness on the other.

Example 11.5

An elected official wishes to evaluate three transportation proposals on the basis of three cri-teria: economic worth, aesthetic quality, and electorate reaction. The economic worth of thealternatives is measured by their NPW, which has been calculated by a consulting firmaccording to accepted practice. The aesthetic attributes of the alternatives have been assessedby a survey conducted by a marketing research company and is measured by the percent ofrespondents that are pleased with each alternative. The probable electorate reaction has beenreported by the official’s staff, who maintain contacts with the voters in the official’s district.The following table summarizes the available information:

NPW AestheticsAlternative (millions of dollars) (%) Electorate

A 6 70 NeutralB 13 40 FavorableC 14 90 Unfavorable

Solution Three possible ways of scoring are presented:

1. Combined rankings. The alternatives may first be ranked according to each criterionfrom the worst (i.e., lowest ranking) to the best (i.e., highest ranking), and a compositescore may be derived by summing the rankings of each alternative. Thus

(11.4.1)

where

Si � score of alternative i

Rij � rank of alternative i with respect to criterion j

For the current example the scores of the three alternatives become:

Alternative NPW Aesthetics Electorate Score

A 1 2 2 5B 2 1 3 6C 3 3 1 7

Si � �j

Rij


This method applies equal weights to the criteria. Moreover, it is oblivious to the degreeto which the alternatives differ from each other with respect to each criterion.

2. Weighted rankings. The criteria may be assigned relative weights, which will affect thecontribution of each criterion to the overall scores:

(11.4.2)

where wj is the relative weight of criterion j. Assuming that the official considers satis-fying the electorate to be four times as important as aesthetics and twice as important aseconomic worth; that is,

w(NPW) � 2 w(aesthetics) � 1 w(elect.) � 4

the scores of three alternatives become:

Alternative Score

A 2 � 1 � 1 � 2 � 4 � 2 � 12B 2 � 2 � 1 � 1 � 4 � 3 � 18C 2 � 3 � 1 � 3 � 4 � 1 � 13

The weights assigned to each criterion are reflected in the overall score of the alterna-tives. However, the problem of scaling the magnitudes associated with the alternativeswith respect to each criterion still remains unsolved. Thus the differences in NPWbetween alternatives A versus B on one hand and B versus C on the other are not cap-tured by this method.

3. Scaled criteria. The three criteria used in this example are measured on different scales:The NPW is a quantitative measure that is unbounded at either end. The scale that hasbeen selected to measure aesthetic quality ranges from 0 to 100. Finally, elector reac-tion has been reported on an ordinal scale. If the three criteria are to be combined into asingle score, they must be placed on a common scale. For the sake of illustration, con-sider a common ordinal scale ranging from 0 to 100. The criterion relating to aestheticsis already measured on this scale. The NPW of each alternative may be mapped onto thecommon scale by assigning a grade, say 90, to alternative C and proportioning accord-ingly the grades of the other two. With respect to the third criterion, neutral reaction maybe used as an anchor midway on the scale.

Alternative NPW Aesthetics Electorate Score I Score II

A 40 70 50 160 350B 85 40 80 205 580C 90 90 40 200 450

Two scores are shown in this table. Score I was derived using a function similar to Eq.11.4.1 with the criteria levels associated with each alternative replacing the raw rank-ings. Score II is based on a weighting scheme, as in Eq. 11.4.2.

Si � �j

wjRij


Discussion This example illustrates the mechanics of only four out of a very large number ofpossible scoring techniques. Theoretically inclined individuals may even be tempted to applyone or more of the scoring techniques described here to combine the various scores derivedabove into a super score, but such a process has no bounds. The potential for an infinite numberof scoring variations, each leading to a different decision, may give to the process the appear-ance of capriciousness or arbitrariness. But no evaluation technique can be an end in itself. Thusthe usefulness of any technique lies in its ability to help organize the decision-making processin an explicit and systemic way and not in its ability automatically to yield an unequivocableresult. This presupposes a predisposition on the part of the decision-maker to participate activelyin all stages of the process, including the identification of impacts and criteria, their scaling andweighing, and ultimately the final decision. As to the choice of technique, it is largely situa-tional, depending on the quantity and quality of the available information.

11.4.5 Group Consensus

Perhaps the major source of difficulty associated with effectiveness analysis is the depen-dence on the subjective judgment of the decision-maker. This dependence is often moder-ated by the reliance on decision-making bodies that consist of many individuals. Butprecisely because of the differences that exist between individuals, group decision makingrequires the attainment of group consensus. Traditional means for reaching consensusinclude group discussion, debate, argumentation, and brainstorming. The advantages ofthese methods include the exposure of the group to differing points of view. A major draw-back is that certain individuals tend to dominate the process because of rank, strength ofconviction, or persuasive ability. Several methods that attempt to eliminate this difficultyhave been devised. Theoretically the group’s consensus may be revealed by statisticallysummarizing the responses of the members of a panel to the questions required by theranking and scoring techniques discussed previously. The delphi method, originally pro-posed by the Rand Corporation [11.8], encompasses several procedures that attempt tofacilitate collective decisions via a series of questionnaires administered to all members ofa panel and accompanied by summaries of the panel’s earlier responses. The final decisionis enhanced by anonymity, equal treatments of all points of view, and the fact that the par-ticipants are free to revise their positions.

11.5 Summary

In this chapter we introduced the concepts of project evaluation and described the elementsof some commonly used methods that can aid the evaluation of alternative courses of actionand can facilitate the selection of an alternative for implementation. The complex nature oftransportation-related decisions was conveyed only by implication because a detailedexamination of the political, legislative, and judicial reverberations of transportation deci-sions is beyond the scope of this introductory book.

Evaluation methods were classified into economic efficiency methods and effective-ness methods. The former require that the quantified impacts that are relevant to evaluationshould be translated into money equivalents and treated as such. The traditional economicefficiency evaluation measures of net present worth and B/C analysis were then describedand illustrated. Finally, the case was made for expanding the evaluation framework to incor-porate impacts that are either impossible or difficult to quantify in terms of dollars. Within


this expanded framework various measures of effectiveness as well as measures of eco-nomic efficiency can serve as evaluative criteria for the ranking and scoring of alternatives.

EXERCISES

1. Drawing on the store of knowledge you have amassed so far, discuss the contents of Table 11.2.1.

2. Discuss several possible ways by which each of the travel, operating characteristics, and costslisted in Table 11.2.2 could have been estimated. Be as specific as you can.

3. Referring to Table 11.2.2, explain why the projected total daily transit patronage is different foreach transportation alternative studied. Which part of the sequential travel-demand-forecastingmethodology do you think produced these results? Explain specifically the most likely modelvariables that capture this effect.

4. In reference to Table 11.2.2, why do you think the estimated daily trips on the 7-mi fixed-guideway alternative are the same as those corresponding to the 7-mi LRT?

5. Perform an incremental B/C analysis of the alternatives listed in Table 11.2.3, assuming aninterest rate of 4%. Why is the interest rate important in the B/C ratio method of evaluation?

6. Repeat Exercise 5 assuming an interest rate of 10%.

7. With reference to objective 7 of Table 11.4.2, why was not the B/C ratio of the baseline alterna-tive reported? What implication can this fact have on the feasibility of the other two alternatives?

8. Perform an incremental analysis of the three alternatives listed in Table 11.4.3 and discuss yourresults.

9. Determine the preferred alternative of a decision-maker who has completed the following arrayon the basis of the contextual relationship alternative i is better than alternative j.


ji A B C D

A 0 0 0 0B 1 0 0 1C 1 1 0 1D 0 0 0 0

10. Using the data given in Table 11.4.2

(a) Calculate the simple combined rankings score of each of the three alternatives with respectto each of the seven objectives.

(b) Rank the alternatives for each objective according to the scores derived in part a.(c) Apply the simple combined rankings technique to the results of part b.(d) Use the following weights to calculate the weighted-ranking scores derived in part (b).

i 1 2 3 4 5 6 7w 2 4 1 4 5 2 7

Explain any assumptions that you felt were necessary to complete this exercise and explain whya universally applicable effectiveness analysis method is not possible.

11. Three alternative plans (A, B, and C) have been ranked with respect to four criteria (I to IV) asfollows:


I II III IV

A 2 1 3 2B 1 2 2 1C 3 3 1 3

where 1 means the best. Apply the single combined-rankings technique to derive an overall scorefor each alternative.

12. Given the following weights for the four criteria of Exercise 11, compute the weighted-rankingscores for the three alternatives.

i I II III IVw 2 4 1 2

13. Discuss the steps you would follow in order to apply the B/C ratio method to evaluate alternativehighway-safety proposals consisting of all possible combinations of 12 accident-reducingactions, such as signalization, curve widening, street lighting, and so on.

14. From the government documents section of your school’s library, obtain a planning study for amajor transportation action and report on the evaluation method employed.

15. Discuss the possible differences in the perspectives of an environmentalist, a construction firmpresident, and a federal judge regarding a proposal to build a multilane highway through a con-servation district. Use Appendix A as a guide to your answer.

REFERENCES

11.1 THOMAS, E. N., and J. L. SCHOFER, Strategies for the Evaluation of Alternative TransportationPlans, National Cooperative Highway Research Program Report 96, Highway Research Board,National Research Council, Washington, DC, 1970.

11.2 MANHEIM, M. L. et al., Transportation Decision-Making: A Guide to Social and EnvironmentalConsiderations, National Cooperative Highway Research Program Report 156, TransportationResearch Board, National Research Council, Washington, DC, 1975.

11.3 URBAN MASS TRANSPORTATION ADMINISTRATION, Draft Environmental Impact Statement:Honolulu Area Rapid Transit Project, UMTA Project Report HI-03-0005, U.S. Department ofTransportation, Washington, DC, July 1979.

11.4 WOHL, M., Transportation Investment Planning: An Introduction for Engineers and Planners,Lexington Books, Lexington, MA, 1972.

11.5 American Association of State Highway and Transportation Officials, A Manual on User BenefitAnalysis of Highway and Bus-Transit Improvements 1977, AASHTO, Washington, DC, 1978.

11.6 United States Code, U.S. Government Printing Office, Washington, DC, 1940, p. 2964.

11.7 SAGE, A. P., Methodology for Large-Scale Systems, McGraw-Hill, New York, 1977.

11.8 DALKEY, N., and O. HELMER, “An Experimental Application of the Delphi Method to the Useof Experts,” Management Science, 9, 3 (April 1963): 458–467.

evaluation and choice

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